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0920 EST Monday December 05 2005

Good Morning: Friday, President George W. Bush finally went on the offensive with glowing remarks on the unprecedentedly strong state of the US Economy, following the news that 215,000 more jobs were created in November and more than 4 Million jobs over the past few years. Given his recent pollings, it was unfortunate that he did not come right out and call a 'spade a spade' and truly declare what we already know is unquestionably: The Best Economy Ever as evidenced by 10 straight quarters 4% average growth.

But, to be fair to him and his humility, the net sum of all parts of what was said pretty much added up to that anyway, given the continuing low employment situation is probably the absolute best since record low unemployment levels were first recorded in the early 1950's. But, as we have said before, in spite of the fact that the Fifties were a time of high productivity, work ethic and nostalgia, a la 'Back to the Future': Comparing the 50's economy with today's is kind of a lot like comparing an emerging economy with today's incredibly complex and highly productive, ultra-technological economy and industry. Only the manufacturing war driven economy of WWII can possibly compare in terms of industrial output. Suffice to say that so many more elements constitute today's economy, that it is hard to compare it with any time past and for that the President deserves full credit for all of his groundbreaking economic initiatives that have ultimately delivered so many record economic results that are now the hallmarks of today's economy and stockmarket, which incidentally is one of the greatest stockmarket advances ever and unquestionably the best in Global terms.

On this theme we have some ideas about what might lie ahead for the coming year based on the very strong performance going into this final month of 2005. Firstly: Whether someone comes up with a $1,000 price for Gold as in the case of the stunningly accurate Louise Yamada, former Citibank ace chartist or Christopher Wood's seemingly outlandish $3,700 call, we examine all of these such distinct possibilities, because in the last Gold Boom, smart analysts were often subject to ridicule for predicting such off the chart numbers as $850 Gold and even more explosive upmoves in Silver were ultimately proven correct. In fact, today the more lethargic reaction by investors to these sorts of numbers recurring anytime soon, just makes the probability of something extraordinary, even more likely. However, it is our view that, in just the same way as most investors cannot see beyond the climactic highs of 25 years ago, those same highs could look like a dress rehearsal or more minor version of what might seriously lie ahead over coming years.

Our fundamental view of the World is that a few years ago Precious and Base Metals and Commodities in general commenced what is more likely to be a 20 ~ 25 year secular Bull Market of Epic Proportions and in just the same way that in 1982 the Dow Jones Industrials and US Stockmarkets kicked off a 20 year run, so too Gold and Silver are now emulating what happened to the DJIA over those first few years with stunning similarities, both in terms of price appreciation and overall micro-wave to mega-wave structuring.

From this we have drawn the conclusions that just as from 1980 and 1982~1985 saw a doubling of the DJIA from its lows of 758 and 770 respectively that following a strong surge in September 1985 though the end of the year in an uncanny resemblance to Gold, to 1550 by year's end, over the first half of 1986, the Dow Jones Industrial Average surged past 1900 in about a 25% move. Such a move in Gold from say $525 would put Gold at $656 or so 7 months from now except that a move of that magnitude and momentum in Gold to that extent, under extraordinary circumstances might well actually have Gold gunning for its all time highs and might even go all the way thru its old highs, in some kind of blow-off surge and potentially exceed those highs some to a $950 peak, or similar levels that Ms Yamada is calling for. Following her deadly accurate call for $67 Oil, if would be a mistake to rule out $1000 Gold. Remember, as we've already pointed out, the Dow rose 76% in only 20 months from its 1,550 level in early 1986, which we foresee as being reminiscent with whatever level as to where Gold might start out from early in 2006 could project to $925 in truncated time.

As for $3,700 towards the end of this decade, that might be a trite too soon, but as for the ultimate number, it would be a mistake to rule that out also, because the multiplier off the Dow Jones 1982 lows through its all time highs just 18 years later, would potentially put Gold trading at close to $3,891 per ounce and by other measurements we noticed that $3,700 can be arrived at in various ways and on the heels of projections by Jim Rogers of Hot Commodities fame of a 15 ~ 25 year bull move, $3,900 by 2019 looks do-able.

Stay tuned for Part 2.

Trade Well
From the Desk of Savant

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